The
New York Times reported this week that the Bush administration is
eliminating almost half of the lawyers at the Internal Revenue Service
who audit the tax returns of the wealthiest Americans. These lawyers
specialize in auditing the returns of those who are subject to gift and
estate taxes. Since taking office in 2001 President Bush has
consistently lobbied Congress to repeal the estate tax, but he hasn’t
been able to get Congress to go along with him. Instead, the Bush
administration has now decided to force the IRS to backpedal and
circumvent the tax laws.

The IRS will cut 157 of the agency’s 345
estate tax lawyers and 17 of the support staff personnel assigned to
them. Six of the IRS lawyers who are likely to be laid off acknowledged
that the cuts were simply the latest moves behind the scenes at the IRS
to protect people with political connections and complex tax-avoidance
schemes from detailed audits. Kevin Brown, an IRS deputy commissioner,
says the agency is auditing enough returns to catch cheaters. But during
the Clinton administration, the IRS stated that cheating by affluent
Americans was one of its biggest problems.

In April 2000, the IRS released the
results of a study on gift tax evasion. When an individual gives gifts
exceeding $675,000 in their lifetime, a tax must be paid on each
additional gift worth more than $10,000 per person per year. The study
determined that more than 80 percent of the 1999 gift tax returns in
excess of $1 million that were audited reported an inaccurate value of
the gift. On average, the gifts were undervalued by $303,000, depriving
the treasury of an additional $167,000. This evasion cost the government
$275 million in 1999.

The study also found that IRS lawyers,
owing to staffing shortages, only spent about 31 minutes auditing each
gift tax return, which typically consisted of dozens of pages. John
Dalrymple, then director of IRS operations, admitted that the agency
lacked the resources to identify those who were falsifying the value of
their gifts, or failing to file their returns. Consequently, the IRS
announced that it was hiring three additional lawyers to audit gift tax
returns. Yet now the IRS says it has too many of these lawyers.

While auditing fewer gift tax returns will
certainly help those of Mr. Bush’s affluent ilk, auditing fewer
fraudulent estate tax returns will be the real bonus from the IRS
layoffs. Currently, only couples with an estate valued at more than $4
million are subject to the estate tax, and the first $4 million they
pass on to their heirs is completely tax-free. Mr. Bush has lobbied
Congress for the last four years to spare the 0.5 percent of Americans
who are subject to the tax by repealing it. But since the Republican-led
Congress, surprisingly enough, hasn’t been willing to go along with him,
the administration will now simply layoff estate tax lawyers. After all,
Deputy IRS Commissioner Brown says additional audits aren’t
worthwhile.

But the agency had a very different
opinion under President Clinton. In December 2000 the IRS announced that
a study found that cheating on estate taxes was more common than
cheating on individual income taxes. And the biggest cheaters were the
very rich, those who left $20 million or more to their heirs. The study
determined that the actual value of the taxable estates audited was on
average 13 percent higher than what was reported on tax returns.
Consequently, the government was being shorted $1.5 billion in taxes
annually.

Secretary of Health and Human Services
Mike Leavitt is almost certainly pleased that there will soon be fewer
IRS estate lawyers. He recently admitted that his family has received
millions of dollars in tax deductions through a so-called charitable
organization it founded. Mr. Leavitt’s parents created the charity,
worth $8 million, in 2000. But in 2002 and 2003, the charity donated
only $100,000, a mere one percent of its total value. Yet Secretary
Leavitt has claimed $1.2 million in tax deductions from the charity. And
the charity loaned more than $300,000 to the family’s own real estate
investment firm, which gave an interest-free loan to Secretary Leavitt
in 2002 worth at least $250,000.

Since President Bush has failed to coerce
Congress to abolish the estate tax, his administration is doing the next
best thing. It’s forcing the IRS to layoff the very lawyers responsible
for catching affluent Americans who cheat. But according to the IRS’ own
studies six years ago, this is a widespread problem. Perhaps never
before in American history have we had a government so completely of the
rich, by the rich, and for the rich.

Gene C. Gerard
has taught history, religion, and ethics for 14 years at several
colleges in the Southwest, and is a contributing author to the
forthcoming book Americans at War, by Greenwood Press. He writes
a blog for the world news web site OrbStandard at:
www.orbstandard.com/GGerard.